Just yesterday we looked at EURNZD. I highlighted the upward sloping flag that’s been developing since December of last year.
As you probably know, EURNZD and GBPNZD often move in tandem. A pattern that forms on one is usually visible on the other.
This time is no exception.
Where EURNZD is still about 100 pips below new resistance though, GBPNZD is testing it as I type this. In fact, yesterday’s session was the first test of 1.9270 as support turned resistance.
But before you rush off to sell the pair, there are a couple of things to keep in mind.
First, the daily mean as represented by the 10 and 20 EMAs is nearly 200 pips above the current price. That suggests we could see a bit more consolidation before the next leg lower.
Second, this is a pound cross. That means Brexit-induced volatility is going to be a risk factor you can’t ignore.
The solution for the first point above is simple: wait.
If you’re concerned about the current distance below the 10 and 20 EMAs, a little bit of patience is all you need.
As for the second consideration, all I can say is you’ll probably want to reduce your risk or avoid the pound altogether.
Only you know what’s best. I can’t decide for you.
What am I doing?
I’m going to stay on the sideline for now. I will most likely also require some form of bearish price action before considering an entry.
As long as GBPNZD trades below that 1.9270 area on a daily closing basis though, the pound cross is vulnerable.
If you want to trade price action like the pros, you need the charts the pros use. That means New York (5 pm EST) close. Get yours here.
Key support comes in at the June lows near 1.8920. A daily close below that would open the door to the year-to-date low at 1.8617.
The latter is the final objective for this upward sloping flag. That gives you at least 600 pips to work with.
Alternatively, a daily close back above new resistance at 1.9270 would negate the bearish outlook.